Cotton Collapse

A year of surplus in 2011/12 has been followed by a collapse in the nation's cotton production. This goes against objectives laid out in Ethiopia's Growth & Transformation Plan (GTP). One of the major issues is the land tenure in the Afar region - formerly responsible for a large percentage of cotton production. This has made it difficult for cotton growers to maintain a healthy living. Although efforts from the Ministry of Agriculture (MoA), through the Agricultural Investment Agency, exist in other regions, they hold no jurisdiction in Afar. This issue is having an impact on the textiles and garment industry in the country, reports ABDI TSEGAYE, FORTUNE STAFF WRITER.

Cotton plant is a source for many important products other than fabric. Among the most important is cottonseed, which is pressed for cottonseed oil that is used in commercial products such as salad oils and snack foods, cosmetics, soap, candles, detergents, and paint.

Cotton is a shrubby plant that is a member of the Mallow family. Its name refers to the cream-colored fluffy fibers surrounding small cottonseeds called a ball. The small, sticky seeds must be separated from the fiber in order to process the cotton for spinning and weaving

Zemichael Tsige, 32, took advantage of his relatives’ experience in the commercial cultivation of cotton in the Afar region, and financial assistance from family members when he first went to the area in 2009, to make a living from the fertile soil of Afar’s Gewane area.

In the first year of his farming business, he leased three hectares of land from a couple, of communal landowners. He signed an agreement, the terms of which meant a monthly payment of 300 Br to each and a 30pc share of the net profits from the farm. He has managed to develop all three hectares, sowing cotton on two hectares and onion on the other.

“The yield at the end of the year [2010/11] was promising and marginally profitable,” he recalls. “I produced around 10qt of raw cotton and sold it at 1,600 Br a quintal.”

This was a year when the total 55,081tn of processed cotton was produced on a total area of close to 100,000ht across the nation. The trade balance of the country in the sector was also positive in the year, with data from the Textile Industry Development Institute (TIDI) showing zero import of lint cotton from abroad. Rather, 58tn of lint cotton was exported with earnings of 181,000 dollars. The total demand of cotton for the country’s emerging textile industry was around 54,000tns, which was almost at equilibrium with the supply.

The promising yields and stable market conditions of the year has encouraged Zemichael to expand his farm using 300,000 Br he has secured through a loan from his sister. This time, he has found a cleared and readymade farm totalling 30ht. Nonetheless, the deal with members of the Afar community has grown to a 50pc share with the owners of the land in addition to the monthly salary payable to communal holders, who do not have to do any work for that. There is no government body involved in the process yet.

The yield this time, 2011/12, however, was not to his expectation and against the national condition. He has succeeded in reaping a total of around 80qtls and sold this for 1,100 Br a quintal to Lucy Agricultural Development Plc – a company that has a cotton farm in the area too.

The aggregate national production of cotton for the year was 79,400tn, sown on 140,000ht of land. Both the amount of production and the total area of cultivated land was the largest for some years, and has not been achieved since. Although the year’s supply has provided the demand from the textile sector, it has not met the expectations of the 1,120 cotton growers or the government agencies related to the sector.

The demand of the year was forecasted to be 67,753tn and the actual amount bought by textile factories stood at 50,000tn. This has left the producers of cotton with a surplus stock of 29,710tn.

This was amidst a ban against the export of cotton in November 2010, which followed the 2009 harvest season, when the national output was a meagre 21,000tn – one of the lowest figures ever. That was a landmark year for demand, which was 45,000tn – twice the supply.

The lifting of the ban on exports once the surplus was piled up has, however, not led to much activity; nor has it prevented some of the growers from shifting their farms from the production of cotton to other cash crops, such as sesame, sorghum and soybeans.

The country only secured 4.1 million dollars by exporting 2,460tn of cotton. This was despite the large amount of the excess produced.

“Many producers have changed their production to sesame, sorghum and soybeans,” says Bante Kase, head of the Cotton Development Directorate at the TIDI. “They have suffered from the decreased price.”

Most of the cotton producers, from the Benishangul Gumuz region, the Metema area of the Amhara region, Humera in the Tigray region and the Gambella region, have shifted their production to other cash crops, says one of the producers, who declined to be named. This producer himself has shifted to sesame.

With the massive shift away from cotton following the surplus that has led to a reduced price and difficulties in finding buyers, the year that followed has shown a significant decrease, both in terms of the land covered by cotton and the amount of raw cotton produced.

The national output declined to 45,000tn, while the land coverage decreased to 81,000ht in the 2012/13 fiscal year, according to data obtained from the TIDI. The plan was to grow 80,000tns of cotton locally by covering 125,000ht of land, and import to meet the rest of the 95,287tn demand by the local industry: 19 textile factories in Ethiopia were expected to have an annual production of 79,409tns of yarn.

The fluctuation continued to be the feature of cotton production in the recently ended fiscal year. Out of the 219,451ht of land planned to be covered with cotton, only 25pc is cultivated, yielding 35,000tn of processed cotton – 16pc of the planned amount.

The situation has affected textile and garment factories in the country. It was expected that cotton farms would supply 504,500tns of raw cotton during the year, whereas the actual supply was just 83,284.3tns, just 16.5pc, according to data from the TIDI. This shortage led to three textile factories importing a total of 3,360tns of processed cotton during the year, according to Mengistu Hiluf, director of Evaluation & Monitoring of Plan & Budget at the Ministry.

“The development of cotton in terms of land coverage, productivity and production has seen a significant decline,” says a document prepared by the TIDI.

Cotton has continued to be one of the most volatile commodities, in terms of its production and market, but not its productivity per hectare, which is in defiance of the government’s plan of progressive growth. Despite the target to increase cotton productivity by 0.2tn a hectare on a yearly basis, from 1.4tn a hectare in 2010/11 to 2.2tn a hectare at the end of the Growth & Transformation Plan (GTP), 2014/15, the yield from a hectare of land has remained almost stagnant at 0.6tn a hectare. This shows that all the ups and downs in the cotton production of the country depends on the size of the land covered with cotton, which has been fluctuating, especially after the year of surplus production.

One of the long standing problems of the sector that is often felt by the actors is the absence of an independent regulatory body, due to which most of the growers approached by Fortune lament, saying that “the sector has no owner”. This is, however, irrespective of the government’s decision that has put the sector under the TIDI.

In addition to the long overdue problem of fertilisers and pesticides, a major problem accountable for the declining production of cotton in the country is the land tenure system in Afar and the ramifications there, according to most of the producers Fortune talked to from the area, including Zemichael.

“No less than 20 growers have either shifted their production or left the area, except three of us currently producing cotton,” says Gebreselama Gebru, owner of Kebrom Agricultural Development, which has been working in the Gewane area of Afar region. “I’m planning to move to the Southern region.”

Naming his farm after a son who died in a car accident in the area, Gebreselama secured 4,000ht on a lease agreement from the clan in the area and has been paying 800 Br annual lease price for a hectare and only 10 Br to the regional government. This year, the clan has accepted the request of Gebreselama to reduce the lease price to 600 Br a hectare. The deal was first made with the clan and then registered by the government, according to Gebreselama and others in the region.

“We bring the labour force from Wollo and Wolayta at a high cost,” he said, claiming a cost of production and labour problem in the labour intensive sector. “Besides, I pay an average of 50,000 Br a month for members of the community, most of whom are not active in the work.”

Some of these people act like guards, although they do not actually do the job.

Hadish Girmay, general manager of Lucy, and the Ethiopian Cotton Producers, Ginners and Exporters Association (ECPGEA), also agrees with the land tenure problem facing producers in the region.

“In addition to the lease payment that is payable to the community, you are forced to pay a certain percentage of the net income to the community,” Hadish told Fortune.

A research meant to identify the main problems of the sector, which was conducted by the Association, has also identified the inapplicability of land use policy in the region as one of the main problems challenging the sustainability of cotton production in a region where around half of the total national production is made.

“Unless the land use policy of the region is urgently implemented, sustaining the agricultural development will be challenging,” reads the research. “If this takes time, transitional solutions to which all the stakeholders agree shall be set.”

This has led to the recent withdrawal of some of the growers, according to Hadish. Azmera Agricultural Development is one of these, according to most of the growers that Fortune has talked to, including Hadish, Zemichael and Gebereselama.

“Due to the absence of land use policy, it is impossible to access credit by mortgaging one’s land use right,” says Hadish, which is also shared by the Association, as well as other growers in the region.

Indeed, a research dubbed “Cotton Plantation Commodity Update” conducted by the Development Bank of Ethiopia (DBE) also recognises the problem.

“There are no coherent policies and laws concerning land in the country all over the regions. Particularly in some cotton production areas (pastoralist areas), land is still owned communally,” according to the research, which was conducted in 2011. “This is the source of conflict between the investors and the pastoralists. There is also no modern and strong legal system to settle conflicts and enforce contracts. This is creating a problem of tenure security on the part of the investor.”

In an attempt to solve this problem and enable the investors to secure loans from the Bank, making their leased land collateral, the measure taken to transfer 20ht for every 100ht developed by investors has also resulted in reduced cotton land covered, according to the producers.

During the year of surplus production, Gebereselam covered a total of 2000ht with cotton. It was in 2011/12 that the regional government told the business to give up 20pc of their developed farm back to the community in exchange for a plan and deed for the remaining 80pc, which they had hoped to use to seek credit from banks. Two years on, however, the regional government is yet to keep its word, they say.

They handed over the land hoping to get a plan and deed for the land, which could help them to secure loane, says Gebereselam. “That has only reduced the amount of land covered with cotton and our production capacity.”

The total land covered by cotton and its production in the region has been declining since the year of surplus production, according to data Fortune has obtained. The close to 31,000ht of land covered with cotton in 2010/11, yielding 686,004qt of raw cotton has declined to 16,837ht, with 257,346qt the following year. This has further gone down to 11,698ht and 210,116qt in 2012/13, according to the data. This indicates that the national share of cotton production from the region constituted 42pc in 2010/11 and only 27pc in 2012/13.

Bante, of the TIDI, says that the problems mentioned by the cotton farmers are common in pastoralist communities, who administer their land their own way. The Afar Regional State has produced a regional land use policy, which they are working to implement, he said. The Ministry of Agriculture, which has been delegated to handle requests for large plots of investment land in the Gambella and Benishangul Gumuz regional states through the Agricultural Investment Agency, says that it has no jurisdiction in Afar.